The Three Places Your Margin Is Quietly Walking Out the Door
Every founder I sit across from on a Margin Discovery Call tells me some version of the same thing. “Revenue’s up. I don’t get it.”
I get it. I’ve seen this movie before, just from the other side of the table.
Twenty-five years in CPG. Over a decade of it spent running trade budgets and sitting in buyer meetings, then eventually a P&L of my own. And here’s the thing nobody tells you when you’re building a CPG brand: your P&L is not lying to you. It’s just not telling you the whole story. It shows you what happened. It doesn’t show you where the money actually went.
So today, three places I go looking first when a founder’s numbers don’t add up. None of them show up on the P&L until it’s too late, and etc., there’s always an etc., but these three account for more leaked margin than anything else I see.
I remember the first time I saw it happen from the retailer’s side of the table, sitting in a buyer meeting at Walmart, watching a supplier explain away a shortfall with a story that didn’t quite hold together. The number was real. The story around it wasn’t. That’s the thing about margin leaks, they almost always come wrapped in a perfectly reasonable explanation. Your job, and mine on a call, is to get past the explanation and back to the number.
Leak #1: Trade Spend That’s Doing More Than You Think
Most founders think of trade spend as a line item. A cost of doing business. Fair enough, it is a cost.
But trade spend isn’t just a number, it’s a decision you made months ago that’s still quietly compounding today. Slotting fees, chargebacks, deductions, co-op advertising, the retailer’s version of “just a small ask.” Each one is small enough on its own to wave off. Stack them up across a quarter and they’re not small anymore.
I managed trade budgets up to $100 million at Johnson & Johnson. I promise you, the principle doesn’t change with the size of the check. The retailers who taught me how trade spend actually works are the same retailers your buyer works for now. The rules weren’t written for you to win by accident.
If you haven’t sat down and traced every dollar of trade spend to an actual, provable return, that’s leak number one. It’s rarely malicious. It’s just invisible, and invisible is exactly how it stays expensive.
Leak #2: The Gap Between What You Were Quoted and What You Actually Pay
Here’s a number worth checking before bed tonight: your true landed cost per unit, all in, no rounding.
Not the number your supplier quoted you. The number after freight, after duties, after the pallet that got reworked, after the case pack that didn’t match the order. Sticker cost and landed cost are two different numbers wearing the same outfit, and most founders are pricing off the wrong one.
I get it, nobody taught you this in a class. There isn’t a class. You learn landed cost the way most of us learn the important things, by getting surprised by it once and never forgetting.
But “sell it for more than it costs” stops being good enough math the moment a retailer enters the picture. The moment you’re capable of shipping a pallet, you’re capable of pricing it correctly too, and that gap between quoted and actual is exactly where I’d look next.
I say it often on Discovery Calls, and I’ll say it here too: your supplier isn’t lying to you when they quote you a number. They’re just quoting you the number that’s true for them, on their side of the shipment. What happens after that pallet leaves their dock, the freight, the duties, the rework, the shrink, that’s your side of the ledger now, and it’s the side most founders never total up until I ask them to.
Leak #3: The Promotion That Looked Like a Win
This one stings a little more, because it usually shows up dressed as good news.
The end cap display. The feature ad. The “successful” promotion that moved a mountain of product. Everyone celebrates. Nobody goes back and asks what that promotion actually cost against what it actually returned.
Promo ROI is the quiet one. Volume feels like victory. But volume without margin is just a more expensive way to be busy, and I’ve watched more than one remarkable, capable founder confuse the two.
Trade spend isn’t a cost of doing business to me. It’s the first place I go looking when the story on paper doesn’t match the story in the bank account, and promo ROI is usually where I find the biggest single piece of it.
Here’s a simple, honest question worth asking after your next promotion, before the celebration email goes out. Did the units you moved actually cover the cost of moving them, plus a real margin on top, or did you just trade profit for a nicer looking sales report that month? Both are real outcomes. Only one of them pays your mortgage.
Why None of This Shows Up Until It’s Too Late
Here’s the pattern across all three. Trade spend, landed cost, promo ROI, they’re all decisions made in the moment, by a reliable, available founder doing fifteen things at once, without a system built to catch the gap between “looks fine in Excel” and “is fine.”
That’s not a character flaw. That’s just what happens when you’re running the business and also trying to see the business at the same time. Nobody can do both well simultaneously, not really, not for long.
This is exactly where the Margin Recovery Framework earns its keep. It’s not a lecture, and it’s not a personality assessment. It’s a way of tracing your actual dollars through trade spend, landed cost, and promo ROI until the gap between your P&L and your bank account finally makes sense. I didn’t build it on a whiteboard. I built it out of a couple decades of real operating results, mine and the founders I’ve sat across from since.
Let’s Go Find Where Yours Is Hiding
I always say the best time to plant a tree was 20 years ago, the second best time is now. So if you’ve been staring at a P&L that says you’re doing great while your gut says something’s off, that gut feeling is data too. It’s just data you haven’t been able to put a number on yet.
That’s what a Margin Discovery Call is for. Forty five minutes, no pitch deck, just your numbers and mine side by side. I’ve found six figures hiding in a founder’s trade spend in less time than that. I’m not promising you’ll find the same, every business is its own fingerprint, but I am promising we’ll look in the right three places first.
When the student is ready, the teacher will appear, and if you’ve read this far, I’d bet you’re more ready than you’re giving yourself credit for.
Book your free Margin Discovery Call, and let’s go find where yours is hiding.